GE’s Bid to Purchase Honeywell Expected to Be Retracted Soon

General Electric Co.’s bid for Honeywell International was near death Monday and the only remaining drama was whether the companies would withdraw the deal before the European Commission kills it today.

The two companies have been “actively considering” withdrawal of the $42-billion transaction late Monday or early today, sources close to the talks said. GE had no comment on the matter.

The 20-member European Commission has scheduled a vote for this afternoon in Strasbourg, France, where everyone involved--including the companies--expects the merger to be rejected.

Commission experts have argued that a merged GE and Honeywell would enjoy an unfair advantage over rivals in the markets for large civil aircraft and avionics.

It’s logical for the companies to choose to withdraw instead of facing a negative vote, experts said. They said a withdrawal--which is what usually happens in cases like this--avoids precedent-setting findings that could be used against the companies in some future case.

Commission spokeswoman Amelia Torres said a merger may be withdrawn at any time but noted: “We need to have a formal withdrawal. It is not sufficient to make an announcement.” She also said the issue was on the agenda for today’s commission meeting.

The last chance to save the deal evaporated Friday when GE Chief Executive Jack Welch rejected a last-minute suggestion by his counterpart at Honeywell, Michael Bonsignore, to slash $1.7 billion from the price to compensate GE for divestitures needed to win Commission approval for the merger.

Two weeks ago, GE offered to sell assets that generate $2.2 billion in revenue and separate the management and accounts of its aircraft leasing arm, GE Capital Aviation Services, or Gecas, from the rest of the company. That fell short of regulators’ demands.

Commissioner Mario Monti also wanted GE to divest a piece of Gecas to competitors Rolls-Royce or Pratt & Whitney, a unit of United Technologies Corp., according to a document obtained by Reuters.

On Friday, Bonsignore was ready to agree to everything the commission wanted to get the deal done, but Welch was not.

Shares of Honeywell sank Friday on the news of the exchange between Welch and Bonsignore, dropping $3.21, or 8.4%, to $34.99 on the New York Stock Exchange, their lowest close since Oct. 18, five days before the deal with GE was announced. On Monday, Honeywell shares fell 79 cents to $34.11.

Shares of GE, which Friday fell 12 cents to $48.75, rose $1.20 to $50.20 on the NYSE.